If you do not have a W-2, are an investor, or are between jobs, you might be considering applying for a stated income loan in Florida. While stated income loans offer a fast and easy application process, you may be wondering whether they have any drawbacks. Let’s take a closer look at the two potential drawbacks that are most often cited with respect to these types of loans and what they really mean for you.
Drawbacks of Stated Income Loans
- Defaults are more likely. You will often hear people say that borrowers are more likely to default on stated income loans than other types of loans. Indeed, some people think that they are the same as the “liar loans” that were around prior to 2008. Actually, today’s stated income loans are very different from those types of loans. In fact, old-fashioned stated income loans no longer exist through reputable lenders and brokers. Before 2008, the phrase “stated income” was very literal. No documentation was required at all. As a result, lenders were approving customers for loans that they literally could not afford. It is no wonder many of these borrowers found themselves unable to keep paying on their mortgages. Anyone who continues to offer “liar loans” today is in violation of the Dodd-Frank Act. Does it happen? Yes. But you can avoid this simply by working only with lenders that have strong reputations and which do require proof of your income. That proof of income comes in the form of bank statements, which is why modern stated income loans are also called “bank statement loans.” Those are the types of loans we can connect you with. Since you will be verifying your income through this alternative means, you will only qualify for a mortgage you can afford. So long as you continue to earn a similar income in the future, you should be able to pay off your loan in full without defaulting, just as you would if you applied for a mortgage through the traditional application process.
Bottom Line: Customers frequently defaulted on old-fashioned stated income loans before 2008. With the Dodd-Frank Act, those loans largely went away. Today’s modern stated income loans are actually bank statement loans. They do require income verification (but no W-2), and are a safe form of financing offered by reputable lenders.
- Interest rates and fees might be higher. The other potential drawback that you might hear about when it comes to stated income loans is higher interest rates and fees. This is less likely to be an issue if you are getting a fair and legal stated income loan through a reputable lender than it would be if you were signing a loan with a predatory lender. With your bank statements, you are verifying your income. That means that you are not an unknown, and a reasonable assessment of your risk level as a borrower can be made. You can also take steps to offset higher interest rates and fees. Provide a longer period of bank statements (i.e. 24 months instead of 12). Make a larger down payment on a home if you can. Maximize your credit score and reduce your debt-to-income ratio. Wait to apply for a mortgage until you are on a stable career path. You also can shop around for the most competitive interest rates and fees instead of going with the first mortgage offer you receive.
Bottom Line: Stated income loans may have higher interest rates than their traditional counterparts, but there are strategies for offsetting those rates. You can find some very competitive offers with the help of a mortgage broker in FL with a large network of quality lenders.
Lending Bankers Mortgage Can Connect You with a Competitive Stated Income Loan in FL from a Trusted Lender
Lender Bankers Mortgage works with a network of trusted lenders throughout Florida. Whether you are in Miami or elsewhere in the state, we can walk you through the modern stated loan process and help you find a mortgage with competitive rates. Have questions about stated income loans, or ready to apply? Please give us a call today at (786) 220-1100. We look forward to working with you.